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IN GENERAL
This chapter discusses the financing of UI benefits and UI administration. Generally, a federal tax finances the administrative costs and some benefit payments. State payroll taxes finance the costs of most benefits. Federal law also considerably influences the financing provisions of state law.

THE FEDERAL TAX AND THE FEDERAL UNEMPLOYMENT TRUST FUND (UTF)
AMOUNT OF TAX–Under the provisions of the Federal Unemployment Tax Act (FUTA), a federal tax is levied on covered employers at a current rate of 6.2% on wages up to $7,000 a year paid to a worker in covered employment. The law, however, provides a credit against federal tax liability of up to 5.4% to employers who pay state taxes timely under an approved state UI program. This credit is allowed regardless of the amount of the tax paid to the state by the employer. Accordingly, in states meeting the specified requirements, employers pay an effective federal tax of 0.8%, or a maximum of $56 per covered worker, per year. This 6.2% tax includes a 0.2% tax increase scheduled to terminate at the end of 2007. The federal tax is not levied against workers.

Historical Note: Initially, the federal tax was 1.0% (0.1% effective tax) of the total wages of a worker. By 1940, it increased to 3.0% (0.3% effective tax) on wages up to $3,000. Since then, the rate has increased a number of times, occasionally, on a temporary basis. In 1985 the federal tax reached its current level of 6.2% (0.8% effective tax) on taxable wages. The taxable wage base increased to $4,200 in 1972, $6,000 in 1978, and $7,000 in 1983.

The credit against the federal tax may be reduced if the state has an outstanding advance (commonly called a “loan”). When states lack the funds to pay UI benefits, they may obtain loans from the federal government. To assure that these loans are repaid, federal law provides that when a state has an outstanding loan balance on January 1 for 2 consecutive years, the full amount of the loan must be repaid before November 10 of the second year, or the credit available to employers will be reduced until the loan is repaid. Section 3302(c), FUTA, provides for certain limits on this credit reduction. Except for cash flow loans (loans obtained from January through September and repaid by September 30 of the same calendar year), interest is charged on all loans made on or after April 1, 1982. The rate is the lesser of 10 percent or the rate of interest paid on the state reserve balance in the federal UTF for the last quarter of the preceding calendar year. Interest payments may not be made from the state’s unemployment fund. 2-1

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USE OF FEDERAL REVENUES–The federal tax funds the following costs:
• •

Federal and state administrative costs for the UI program; The federal share of benefits paid under the Federal-State Extended Unemployment
Compensation Act of 1970; (This program “triggers on” during periods of high and rising
unemployment.)
The loan fund from which an individual state may obtain advances (or “loans”) whenever it lacks funds to pay UI due; and Labor exchange services under the Wagner-Peyser Act, employment and training services for
veterans and disabled veterans under Chapter 41 of Title 38 of the U.S. Code, and some labor
market information program activities.

THE UNEMPLOYMENT TRUST FUND (UTF)—The federal UTF in the U.S. Treasury consists of 59 accounts:

One account for each state. Each state account consists of the contributions and reimbursements collected by the state. Interest earned on these amounts is credited to the state accounts. Money is withdrawn from state accounts for benefits, refunds of contributions erroneously paid, and limited statutory exceptions. The employment security administration account. Each year, Congress appropriates from this
account the funds necessary for administering the federal-state UI program, labor exchange
services under the Wagner-Peyser Act, employment and training services for veterans and
disabled veterans under Chapter 41 of Title 38 of the U.S. Code, and some labor market
information program activities.
The extended unemployment compensation account reimburses the states for the federal share of extended benefits. The federal unemployment account provides states with repayable advances for paying benefits. The federal employees compensation account finances benefit payments to former federal and
military employees.
Two accounts related to the Railroad Retirement Board.

• •

All federal payroll taxes are deposited in the employment security administration account. Amounts equal to one-tenth of net monthly collections are automatically transferred to the extended unemployment compensation account. On September 30th of each year, the net balance in the employment security administration account is determined. If the amount in this account exceeds 40 percent of the prior year’s appropriation by Congress, then an “excess” exists. This excess is transferred to the extended unemployment compensation account and/or the federal unemployment account as provided by the Social Security Act unless the balance of each of these accounts exceeds its statutory ceiling. The net balances of the extended unemployment compensation account and the federal unemployment account are also determined on September 30th of each year. The statutory ceiling in the extended unemployment compensation account equals 0.5 percent of total wages in covered employment for the preceding calendar year. For the federal unemployment account, the statutory ceiling equals 0.5 percent of total wages in covered employment for the calendar year. Excess balances are transferred between these accounts or to the administration account as required by the Social Security Act. If all three accounts are at their 2-2

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statutory limits, then the excess amounts are distributed to the state accounts in the UTF in the same proportion that their covered payrolls bear to the aggregate covered payrolls of all states. These are commonly called “Reed Act” distributions.

Technical Note: The Social Security Act provides that the maximum balance in the extended unemployment compensation account is the greater of $750 million or 0.5 percent of total wages in covered employment. Due to the growth in covered employment, the $750 million figure is effectively obsolete. A similar provision relating to the federal unemployment account ($550 million) is similarly obsolete.

With the exception of Reed Act moneys, the sums deposited in a state’s account are available only for benefit purposes. A state may, through an appropriation of its legislature, use Reed Act moneys under certain conditions to supplement federal administration grants in financing its UI program and system of public employment offices. Forty-eight1 states have amended their UI laws to permit use of these Reed Act moneys for administrative purposes, and most states have appropriated funds for buildings, supplies, and other administrative expenses.

STATE TAXES AND OTHER STATE REVENUES
To enable employers to obtain credit against the federal tax, all states finance the costs of UI benefits by imposing payroll taxes, commonly called “contributions,” on employers. In addition, three state laws require employee contributions under certain conditions. Federal law requires that nonprofit organizations, state and local governmental entities, and federally recognized Indian tribes be given the option of making “payments in lieu of contributions” (commonly called “reimbursements”). EMPLOYER TAXES—The amount of tax an employer pays depends on the number of its employees, the state’s taxable wages, and the contribution rate assigned the employer. Since employers wish to receive the maximum credit of 5.4 percent against the federal payroll tax, all state laws provide for assignment of a contribution rate of 5.4 percent or higher. In all states, an employer pays a contribution rate based on its “experience.” In all states, new and newly-covered employers pay a “new employer rate” until they meet the requirements for experience rating. In some states, additional contributions are required when fund levels drop to specified points or to restore amounts expended for noncharged or ineffectively charged benefits. Noncharged benefits are those charged to a general account rather than an individual employer account. Ineffectively charged benefits include those charged to inactive and terminated accounts, and those charged to an employer's experience rating account after the previously charged benefits to the account were sufficient to qualify the employer for the maximum contribution rate. In some states, the state UI agency collects additional taxes imposed on the employer’s payroll. Although the revenues from these additional taxes are not deposited in the state’s unemployment fund, they sometimes serve UI or employment and training purposes. In every state, an employer who has overpaid contributions is entitled to a refund. These refunds may be made within time limits ranging from 1 to 6 years; in a few states no limit is specified.

1

All states except DE, DC, IL, PR and SD. 2-3

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Technical Note: Federal and state laws provide for a “standard rate” of contributions. At one time, the standard rate for federal and state law purposes was identical; now this is not always the case. For federal purposes, a state must have a standard rate of at least 5.4 percent if its employers are to obtain the full credit against the federal tax. As a result, the Department of Labor accepts a 5.4 percent rate (or in its absence, the highest rate assigned based on experience) as being the standard rate for federal law purposes. Many state laws use the term standard rate in this sense. Other state laws use the term differently; it may, for example, be the new employer rate. EMPLOYEE TAXES—Only Alaska, New Jersey, and Pennsylvania levy UI taxes on workers. The tax base is that applicable to employers except in Pennsylvania where employee contributions are calculated on total gross covered wages paid for employment. Worker taxes are deducted by the employer from the worker’s pay and forwarded with the employer’s taxes to the state agency. In Alaska, the tax rate is equal to 20% of the average benefit cost rate, but not less than 0.5% or more than 1.0%. In New Jersey, the tax rate is 0.3825% effective July 1, 2004 and thereafter. Depending on the adequacy of the fund balance in a given year, Pennsylvania employees pay contributions ranging from 0.0% to 0.09% on total gross covered wages paid for employment. INTEREST AND PENALTY FUNDS—In every state, an employer is subject to certain interest or penalty payments for delay or default in payment of contributions, and usually incurs penalties for failure or delinquency in filing required reports. All states except Minnesota have set up special administrative funds, made up of such interest and penalties, to meet special needs. The most usual statement of purpose includes one or more of these three items:

To cover expenditures for which federal funds have been requested but not yet received, subject
to repayment to the fund;
To pay costs of administration found not to be properly chargeable against funds obtained from
federal sources; or
To replace funds lost or improperly expended for purposes other than, or in amounts in excess of, those found necessary for proper administration.

A few of these states provide for the use of such funds for the purchase of land and erection of buildings for agency use or for the payment of interest on federal advances. In some states, the fund is capped; when it exceeds a specified sum, the excess is transferred to the unemployment fund or, in one state, to the general fund. TAXABLE WAGES—More than half of the states have adopted a higher tax base than that applicable under FUTA. In these states, an employer pays a tax on wages paid to (or earned by) each worker within a calendar year up to the specified amount. In addition, most of the states provide an automatic adjustment of the wage base if the FUTA is amended to apply to a higher taxable wage base than that specified under state law. Some states have established flexible tax bases, i.e., bases that are automatically adjusted, generally on an annual basis. Most of these states key the adjustment to some measure of previous wages.
Table 2-1: TAXABLE WAGE BASES State AL AK * Taxable Wage Base $8,000 $30,100 Wages Include Remuneration Over $7,000 If Subject To FUTA X State LA * ME Taxable Wage Base $7,000 $12,000 Wages Include Remuneration Over $7,000 If Subject To FUTA X X State Taxable Wage Base $9,000 $13,200 Wages Include Remuneration Over $7,000 If Subject To FUTA

OH
OK *

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Table 2-1: TAXABLE WAGE BASES State AZ AR CO CT DE DC FL GA HI * ID * IL IN IA * KS KY Taxable Wage Base $7,000 $10,000 $10,000 $15,000 $8,500 $9,000 $7,000 $8,500 $35,300 $30,200 $11,500 $7,000 $22,000 $8,000 $8,000 X X X X X Wages Include Remuneration Over $7,000 If Subject To FUTA X X X X X X X X X State MD MA MI MN * MS MO MT * NE NV * NH NJ * NM * NY NC * ND * Taxable Wage Base $8,500 $14,000 $9,000 $24,000 $7,000 $11,000 1/ $22,700 $9,000 $24,600 $8,000 $26,600 $18,600 $8,500 $17,800 $21,300 X X X X X X X X X X Wages Include Remuneration Over $7,000 If Subject To FUTA X X X State OR * PA RI SC SD TN TX UT * VT VA VI * WA * WV WI WY * Taxable Wage Base $29,000 $8,000 $16,000 2/ $7,000 $8,500 $7,000 $9,000 $25,400 $8,000 $8,000 $20,500 $31,400 $8,000 $10,500 $18,100 X X X X X X X X X X Wages Include Remuneration Over $7,000 If Subject To FUTA

NOTE: California and Puerto Rico are not included in this table since they neither have a taxable wage base above $7,000 nor a provision in their law that automatically adjusts the taxable wage base if FUTA is amended to apply to a higher amount than that specified under state law. 1/ In MO, the wage base is $11,000 in 2007, $12,000 in 2008, and $12,500 in 2009; beginning in 2010, if the average four quarter fund balance, on September 30, is (1) less than, or equal to $350 million, then the taxable wage base will increase by $1,000 the next year; or (2) $650 million or more, then the taxable wage base will be decreased by $500; however, the taxable wage base may not increase beyond $13,000, or decrease to less than $7,000. 2/ The taxable wage base in RI will range from $12,000 to $19,000 depending on the amount of the unemployment fund on Sept. 30 of each CY. * Flexible taxable wage base, see following table.

Table 2-2: COMPUTATION OF FLEXIBLE TAXABLE WAGE BASES Computed As -State % Of State Average Annual Wage (13 States) AK HI ID IA 75 rounded to nearest $100 100 rounded to nearest $100 100 rounded to nearest $100 66 ⅔% of the state AWW, multiplied by 52, or the federal taxable wage base; rounded to higher $100. X Other (5 States) Preceding CY (5 States) Period Of Time Used -12 Months Ending June 30 (6 States) X X X Second Preceding CY (4 States)

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Table 2-2: COMPUTATION OF FLEXIBLE TAXABLE WAGE BASES Computed As -State % Of State Average Annual Wage (13 States) LA MN MT NV NJ NM NC ND OK OR UT VI 60 rounded to nearest $100 115% of previous year's taxable wage base rounded to the lower $100, but not to exceed 80% of AAW for the 2nd preceding CY rounded to the lower $100. 55 rounded to lower $100 X 60 rounded to higher $100 50 rounded to nearest $100 70 rounded to nearest $100 50 rounded to nearest $100 80 rounded to nearest $1,000 75% of the prior average fiscal year wage rounded to the higher $100. X X X X X 60 rounded to nearest $1,000 80 rounded to nearest $100 66 ⅔ rounded to nearest $100 28 x state AWW; rounded to higher $100. X Other (5 States) Depends on fund balance; it could be $7,000, $7,700, or $8,500. X X X X Preceding CY (5 States) Period Of Time Used -12 Months Ending June 30 (6 States) Second Preceding CY (4 States)

WA

WY

EXPERIENCE RATING
All state laws use a system of experience rating by which individual employers' contribution rates are varied on the basis of their experience with the risk of unemployment. Experience rating systems are designed to encourage employers to stabilize employment, equitably allocate the costs of unemployment, and to encourage employers to participate in the system by providing eligibility information. FEDERAL REQUIREMENTS FOR EXPERIENCE RATING—State experience rating provisions have developed on the basis of the additional credit provisions of Section 3303(a), FUTA. Federal law allows employers additional credit for a lowered rate of contribution if the rates were based on not less than 3 years of “experience with respect to unemployment or other factors bearing a direct relation to unemployment risk.” FUTA allows the states to extend experience rating tax reductions to new and newly covered employers after they have had at least 1 year of such experience. Further, states allow new and newly covered employers a reduced rate (but not less than one percent) on a reasonable basis.

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STATE REQUIREMENTS FOR EXPERIENCE RATING—In most states, 3 years of experience with unemployment means more than 3 years of coverage and contribution experience. Factors affecting the time required to become a “qualified” employer include:
• •

The coverage provisions of the state law (“at any time” vs. “20 weeks”); In states using benefits or benefit derivatives in the experience-rating formula, the type of base period and benefit year, and the lag between these two periods, which determine how soon a new employer may be charged for benefits; The type of formula used for rate determination; and The length of the period between the date as of which rate computations are made and the
effective date for rates.

• •

Historical Note: The first state UI system in this country (Wisconsin) set up a separate reserve for each employer. Employer contributions were credited to this reserve and benefits paid to former employees were charged to it as long as the account had a credit balance. Most of the states enacted “pooled-fund” laws on the theory that the risk of unemployment should be spread among all employers and that workers should receive benefits regardless of the balance of the contributions paid by the individual employer and the benefits paid to such workers. All states now have pooled unemployment funds. EXPERIENCE RATING FORMULAS—Within the broad federal requirements, the experience rating provisions of state laws vary greatly. The most significant variations grow out of differences in the formulas used for rate determinations. The factor used to measure experience with unemployment is the basic variable which makes it possible to establish the relative incidence of unemployment among the workers of different employers. At present there are four distinct systems, usually identified as reserve-ratio, benefit-ratio, benefitwage ratio, and payroll variation formulas. A few states have combinations of the systems. All systems have certain common characteristics. All formulas are devised to establish the relative experience of individual employers with unemployment or with benefit costs. To this end, all have factors for measuring each employer's experience with unemployment or benefit expenditures, and all compare this experience with a measure of exposure--usually payrolls--to establish the relative experience of large and small employers. However, the four systems differ greatly in the construction of the formulas, in the factors used to measure experience and the methods of measurement, in the number of years over which the experience is recorded, in the presence or absence of other factors, and in the relative weight given the various factors in the final assignment of rates. RESERVE-RATIO FORMULA—The reserve-ratio [(contributions minus benefits charged) divided by payroll] was the earliest of the experience rating formulas and continues to be the most popular. The system is essentially cost accounting. On each employer's record are entered the amount of payroll, contributions, and the benefits paid to workers. The benefits are subtracted from the contributions, and the resulting balance is divided by the payroll to determine the size of the balance in terms of the potential liability for benefits. The balance carried forward each year under the reserve-ratio plan is ordinarily the difference between the employer's total contributions and the total benefits received by workers since the employer became subject to the UI law. Rates are assigned according to a schedule of rates for specified ranges of reserve ratios--the higher the ratio, the lower the rate. Also, fluctuations in the state fund balance affect the rate that an employer will pay; an increase in the fund may trigger a tax rate schedule in which a lower rate is assigned and, conversely, a decrease in the fund balance may trigger a tax schedule requiring a higher rate.

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Table 2-3: RESERVE-RATIO FORMULA STATES State AZ AR CA CO DC GA HI ID IN KS KY LA ME MA MO MT NE Years Of Benefits & Contributions Used All past years. All past years. All past years. All past years. All since July 1, 1939. All past years. All past years. All since Jan. 1, 1940. All past years. All past years. All past years. All since Oct. 1, 1941. All past years. All past years. All past years. All years since Oct. 1, 1981. All past years. Years Of Payrolls Used 1/ Average of 3 years, ending 6 months before computation date. Average last 3 or 5 years, whichever is lower. Average of 3 years, ending 6 months before computation date. Average 3 years. Average of 3 years, ending 3 months before computation date. Average 3 years. Average 3 years. Average 4 years. Aggregate 3 years. Average 3 years. Aggregate 3 years. Average 3 years. Average 3 years. Last year. Average 3 years. Average 3 years. Average 4 years. State NV NH NJ NM NY NC ND OH PR RI SC SD TN VI WV WI Years Of Benefits & Contributions Used All past years. All past years. Last 5 years under specified conditions. All past years. All past years. All past years. All past years. Last 6 years. All past years. Last 3 years. All since Oct. 1, 1958 All past years. All past years. All past years. Last 3 years. All past years. All past years. Years Of Payrolls Used 1/ Average 3 years. Average 3 years. Average last 3 or 5 years, whichever is higher. Average 3 years. Average of 5 years, ending 3 months before computation date. Aggregate 3 years. Average 3 years. Average 3 years. Last 3 years. Average 3 years. Last year. Aggregate 3 years. Average 3 years. Last 3 years. Average 3 years. Last year.

1/ Years immediately preceding or ending on computation date, unless noted.

BENEFIT-RATIO FORMULA—The benefit-ratio formula (benefits charged divided by employer’s payroll) also uses benefits as the measure of experience, but eliminates contributions from the formula and relates benefits directly to payrolls. The theory is that, if each employer pays a rate which approximates his benefit ratio, the program will be adequately financed. Rates are further varied by the inclusion in the formulas of schedules (effective at specified levels of the state fund in terms of dollar amounts), proportion of payrolls, or fund adequacy percentage. Unlike the reserve-ratio, the benefit-ratio system is geared to short-term experience. The table below shows the number of years used for each state in determining benefit ratios.
Table 2-4: BENEFIT-RATIO FORMULA STATES State AL CT Years Of Benefits Used Last 3 fiscal years. Last 3 years. Years Of Payrolls Used (Years Immediately Preceding Or Ending On Computation Date, Unless Noted) Last 3 fiscal years. Last 3 years, ending 6 months before computation date. State OR PA * Years Of Benefits Used Last 3 years. All past years. Years Of Payrolls Used (Years Immediately Preceding Or Ending On Computation Date, Unless Noted) Last 3 years. Average 3 years.

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Table 2-4: BENEFIT-RATIO FORMULA STATES State FL IL IA MD MI * MN MS Years Of Benefits Used Last 3 years. Last 3 years. Last 5 years. Last 3 years. Last 5 years. Last 4 years. Last 3 years. Years Of Payrolls Used (Years Immediately Preceding Or Ending On Computation Date, Unless Noted) Last 3 years, ending 3 months before computation date. Last 3 years. Last 5 years. Last 3 years. Last 5 years. Last 5 years. Last 3 years. State TX UT VT VA WA WY Years Of Benefits Used Last 3 years. Last 4 years. If 4 years not available, will use up to 1 year minimum. Last 3 years. Last 4 years. Last 4 years. Last 3 years. Years Of Payrolls Used (Years Immediately Preceding Or Ending On Computation Date, Unless Noted) Last 3 years. Last 4 years. If 4 years not available, will use up to 1 year minimum. Last 3 years. Last 4 years. Last 4 years. Last 3 years.

* Benefit-ratio predominates. State also has a reserve ratio component.

BENEFIT-WAGE-RATIO FORMULA—The benefit-wage formula is radically different. The formula is designed to assess variable rates which will raise the equivalent of the total amount paid out as benefits. The percentage relationship between total benefit payments and total benefit wages in the state during 3 years is determined. This ratio, known as the state experience factor, means that, on the average, the workers who drew benefits received a certain amount of benefits for each dollar of benefit wages paid and the same amount of taxes per dollar of benefit wages is needed to replenish the fund. The total amount to be raised is distributed among employers in accordance with their benefit-wage ratios; the higher the ratio, the higher the rate. Individual employer's rates are determined by multiplying the employer's experience factor by the state experience factor. The multiplication is facilitated by a table which assigns rates that are the same as, or slightly more than, the product of the employer's benefit-wage ratio and the state factor. The range of the rates is, however, limited by a minimum and maximum. The minimum and the rounding upward of some rates tend to increase the amount which would be raised if the plan were affected without the table; the maximum, however, decreases the income from employers who would otherwise have paid higher rates.

Table 2-5: BENEFIT-WAGE-RATIO FORMULA STATES State DE OK Years Of Benefits Used Last 3 years. Last 3 years. Years Of Payrolls Used (Years Immediately Preceding Or Ending On Computation Date) Last 3 years. Last 3 years.

PAYROLL VARIATION PLAN—The payroll variation plan is independent of benefit payments to individual workers; neither benefits nor any benefit derivatives are used to measure unemployment. Experience with unemployment is measured by the decline in an employer's payroll from quarter to quarter. The declines are expressed as a percentage of payrolls in the preceding period, so that experience of employers with large and small payrolls may be compared. If the payroll shows no decrease or only a small percentage decrease over a given period, the employer will be eligible for the largest proportional reductions. Alaska measures the stability of payrolls from quarter to quarter over a 3 year period; the changes reflect changes in general business activity and also seasonal or irregular declines in employment. Also, Alaska 2-9

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arrays employers according to their average quarterly decline quotients and groups them on the basis of cumulative payrolls in 20 classes for which rates are specified in a schedule.

CHARGING METHODS
Since various methods are used to identify the employer(s) who will be charged with benefits when a worker becomes unemployed and receives benefits, the laws address this issue in some detail. In the reserveratio and benefit-ratio states, it is the worker’s benefit payments that are charged; in the benefit-wage ratio states, the benefit wages. There is no charging of benefits in the payroll-decline systems. In most states, the maximum amount of benefits to be charged is the maximum amount for which any worker is eligible under the state law. In the states with benefit-wage-ratio formulas, the maximum amount of benefit wages charged is usually the amount of wages required for maximum annual benefits. CHARGING MOST RECENT OR PRINCIPAL EMPLOYER—Some states charge the most recent employer on the theory that this employer has primary responsibility for the unemployment. All the states that charge benefits to the last employer relieve the employer of these charges if only casual or short-time employment is involved. Charging the most recent base period employer assumes that liability for benefits is inherent in wage payments.
Table 2-6: STATES THAT CHARGE MOST RECENT OR PRINCIPAL EMPLOYER State Employer Specified State Employer Specified Most recent. Charges omitted for employers who paid claimant less than 4 consecutive weeks. Benefits paid following disqualifications for voluntary leaving, discharge for misconduct and refusal of suitable work will be charged to the employer's account who furnished the employment. Most recent employer charged 7 x claimant’s WBA; thereafter, BP employers charged proportionately (with respect to wages). Most recent employer charged 50% of benefits paid and the remaining 50% charged proportionately to all BP employers. Most recent BP employer. Most recent. Charges omitted for employers who employed claimant less than 8 x WBA. Most recent. Charges omitted for employers who employed claimant less than 30 days or 240 hours.

GA

Most recent. Employer who paid largest amount of BPW. Charges omitted if worker continues to perform services for the employer. Most recent. Charges omitted for employers who employed claimant less than 30 days. Most recent. Charges omitted for employers who employed claimant less than 10 weeks. Most recent. Charges omitted for employers who employed claimant less than 5 weeks. Most recent employer charged for first 2 weeks of benefits. Thereafter, BP employers charged proportionately (with respect to wages). Employer who paid 75% of a claimant's BPW, except if a reimbursing employer is liable.

NH

ID IL KY ME MI NV

NY PR RI SC VA

CHARGING BASE-PERIOD EMPLOYERS IN INVERSE CHRONOLOGICAL ORDER—Some states limit charges to base-period employers but charge them in inverse order of employment. This method combines the theory that liability for benefits results from wage payments with the theory of employer responsibility for unemployment; responsibility for the unemployment is assumed to lessen with time, and the more remote the employment from the period of compensable unemployment, the less the probability of an employer being charged. A maximum limit is placed on the amount that may be charged any one employer; when the limit is reached, the next previous employer is charged. The limit is usually fixed as a fraction of the wages paid by the employer or as a specified amount in the base period or in the quarter, or as a combination of the two. Usually the limit is the same as the limit on the duration of benefits in terms of quarterly or base-period wages. 2-10

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If a worker's unemployment is short, or if the last employer in the base period employed the worker for a considerable part of the base period, charging employers in inverse chronological order gives the same results as charging the last employer in the base period. If a worker's unemployment is long, such charging gives much the same results as charging all base-period employers proportionately. All the states that provide for charging in inverse order of employment have determined, by regulation, the order of charging in case of simultaneous employment by two or more employers.
Table 2-7: STATES THAT CHARGE BASE-PERIOD EMPLOYERS IN INVERSE CHRONOLOGICAL ORDER State CO IA MA In Inverse Order Of Employment Up To Amount Specified ⅓ wages up to ⅓ of 26 x current WBA. In proportion to BP wages. 36% of BP wages. State NE SD In Inverse Order Of Employment Up To Amount Specified ⅓ BP wages. In proportion to BP wages. Charges omitted for employers who paid worker less than $100.

CHARGING IN PROPORTION TO BASE-PERIOD WAGES—On the theory that unemployment results from general conditions of the labor market more than from a given employer's separations, the largest number of states charge benefits against all base-period employers in proportion to the wages earned by the worker with each employer. Their charging methods assume that liability for benefits is inherent in the wage payments creating the worker’s eligibility. (Note that states combining this method with charging the most recent employer are listed on the “Charging Most Recent or Principal Employer” table).
Table 2-8: STATES THAT CHARGE IN PROPORTION TO BASE-PERIOD WAGES State AL AZ AR CA CT Special Provisions X X X X Charges omitted for employers who paid claimant less than $500. State NJ NM NC ND OH Special Provisions X X Amount charged to a BP employer’s account is the benefit allocated to such employer multiplied by 120%. X X If employer recalls a laid-off or separated employee and the employee continues to be employed, or voluntarily terminates employment or is discharged for misconduct within the BY, benefit charges may be reduced by the ratio of remaining weeks of eligibility to the total weeks of entitlement. X X X X X X X

DE

X

OK

DC FL HI IN KS LA MD

X Charges omitted for employers who paid worker less than $100. X Law also provides for charges to BP employers in inverse order. X X Principal employer will be charged for shut downs for convenience. Employers participating in shared work will bear all charges.

OR PA TN TX UT VT VI

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Table 2-8: STATES THAT CHARGE IN PROPORTION TO BASE-PERIOD WAGES State MN MS MO MT Special Provisions X X Charges omitted for employers who employed claimant less than 28 days or paid him less than $400. X State WA WV WI WY Special Provisions Charged to separating employer for certain quits with good cause. X Benefits are not charged to an employer constituting less than 5% of a claimant's BP wages. X

NONCHARGING OF BENEFITS
Many states recognize that certain benefit costs should not be charged to individual employers. This has resulted in “noncharging” provisions in practically all state laws using benefits in their formulas. In the states which charge benefits, certain benefits are omitted from charging as indicated below; in the states which charge benefit wages, certain wages are not counted as benefit wages. The postponement of charges until a certain amount of benefits has been paid results in noncharging of benefits for workers whose unemployment was of very short duration. In many states, charges are omitted when benefits are paid on the basis of an early determination in an appealed case and the determination is eventually reversed. In many states, charges are omitted in the case of benefits paid under a combined wage claim. In Connecticut, Massachusetts and Rhode Island dependents' allowances are not charged to employers' accounts. Another type of noncharging is for benefits paid following a period of disqualification for a voluntary quit, misconduct, a refusal of suitable work, or for benefits paid following a separation for which no disqualification was imposed; e.g., because the worker had good personal cause for leaving voluntarily, or because of a job which lasted throughout the normal disqualification period and then was laid off for lack of work. The intent is to relieve the employer of charges for unemployment caused by circumstances beyond the employer's control. The provisions differ with variations in the employer to be charged and with the disqualification provisions, particularly as regards the cancellation and reduction of benefit rights. In this summary, no attempt is made to distinguish between noncharging following a period of disqualification and noncharging where no disqualification is imposed. Most states provide for noncharging where voluntary leaving or discharge for misconduct is involved and, in some states, refusal of suitable work. A few of these states limit noncharging to cases where a worker refuses reemployment in suitable work. The following table provides information on which benefits are excluded from charging in the states. Alaska, a payroll variation state, is excluded because benefit charges are not a factor in determining experience rates.
Table 2-9: BENEFITS EXCLUDED FROM CHARGING State AL FederalState Extended Benefits Benefit Award Finally Reversed X Reimbursements On Combined Wage Claims 1/ Voluntary Leaving X Limited to compelling personal reasons not attributable to employer and not warranting disqualification and to leaving work due to mutually-agreed-upon mandatory retirement age. Discharge For Misconduct X Refusal Of Suitable Work Continues To Work For Employer On Same Part-Time Basis X

AZ

X

X

X

X

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Table 2-9: BENEFITS EXCLUDED FROM CHARGING State AR FederalState Extended Benefits X Benefit Award Finally Reversed Reimbursements On Combined Wage Claims 1/ Voluntary Leaving X Limited to quits to take other jobs, accompanying spouse, domestic violence, and irresistible impulse to use intoxicants. If separated (discharged or quit) due to domestic violence when the conditions of the law are met. If quit one construction job to take a better construction job when the conditions of the law are met. X X X X X X X For claimants who retire under agreed-upon mandatory-age retirement plan. Also for claimants who quit to follow military spouses. X X X, including quits to accept another job. X X X X X X X, including quits from part-time or interim job in order to protect fulltime or regular job. X X Discharge For Misconduct X Refusal Of Suitable Work Continues To Work For Employer On Same Part-Time Basis X

CA

X

X

X

CO

X

X

X

CT DE DC FL

X X X X

X X X Limited to refusal of reemployment. Limited to refusal of reemployment in suitable work. X

GA

X

X

X

HI ID IL IN IA KS KY LA

X X X

X X X X

X X X X X X X X X Limited to refusal of reemployment in suitable work. X X

X

X X

X

X

X

X

ME

X

X

X

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Table 2-9: BENEFITS EXCLUDED FROM CHARGING State FederalState Extended Benefits Benefit Award Finally Reversed X Reimbursements On Combined Wage Claims 1/ Voluntary Leaving X, including quits without good cause attributable to work, to accept a better job, or to enter approved training. X X X X X For claimant leaving to accept more remunerative job or quit unsuitable work within 28 days. X, including quits due to circumstances resulting from sexual assault or stalking. X, including accompanying spouse to spouse’s employment in a different city, new military duty station, or for accepting insured work in construction industry. X, including quits to accompany military spouse and to take other employment. Discharge For Misconduct Only for gross and aggravated misconduct. For claimant convicted of felony or misdemeanor. X X X X X X X Refusal Of Suitable Work Continues To Work For Employer On Same Part-Time Basis X

MD

MA MI MN MS

X

MO

X

X X, including discharges due to circumstances resulting from sexual assault or stalking.

X

MT

X

X

NE

X

X

NV NH

X

X X

X

NJ

X

X, including BY employer if worker left that job by a disqualifying separation. 2/ X, including separations due to domestic violence. X

X, including BY employer if worker left that job by a disqualifying separation. 2/ X, including separations due to domestic violence. X X X

X, including BY employer if separation due to failure to accept suitable work without good cause.

NM NY NC ND

X

X

X X

X X

X X

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Table 2-9: BENEFITS EXCLUDED FROM CHARGING State FederalState Extended Benefits Benefit Award Finally Reversed X X X X X Reimbursements On Combined Wage Claims 1/ X Voluntary Leaving X, including quits from interim or part-time job to protect full-time job. X X X Discharge For Misconduct Refusal Of Suitable Work X, only if due to participation in approved training Continues To Work For Employer On Same Part-Time Basis X X X X

OH OK OR PA PR RI X

X X X X

X

X

X X, including quits due to domestic violence. X X X, including quits due to domestic violence or stalking. X X X X Only for quits to accept other employment, to enter approved training, because of a non-job related injury or medical condition, or required in work release programs as a condition of release/parole.

X X, including discharge due to domestic violence. X X X, including discharge due to domestic violence or stalking. X X X X X X X, limited to refusal of reemployment in suitable work.

SC

X

X

SD TN TX UT VT

X

X X X

X

X

VA

X

Separation due to violation of law leading to jail time.

Refusal of rehire due to participation in approved training.

VI WA WV WI WY X X X X X X X X X X X X

X, including quits due X X to domestic violence. 1/ Most states limit noncharging to specific situations such as benefits paid in excess of amount payable under state law or if claimant would have been ineligible using only the in-state wages. 2/ Also, does not charge employer if claimant was discharged or left work because of domestic violence.

Four states (Arkansas, Colorado, Maine, and North Carolina) have special provisions or regulations for identifying the employer to be charged in the case of benefits paid to seasonal workers. In general, seasonal employers are charged only with benefits paid for unemployment occurring during the season, and nonseasonal employers with benefits paid for unemployment at other times. 2-15

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A few states, including Arizona, Colorado, Massachusetts, Montana, New Mexico, New Jersey, Oklahoma, Texas, Washington and Wyoming, provide that an employer’s account will not be charged for benefits paid to an employee who quit to escape domestic violence. In Indiana, benefits are not charged to a base-period employer when unemployment is a direct result of the condemnation of property by municipality, state, or federal government, due to a fire, flood, or act of nature, when at least 50% of the employees (including the claimant) become unemployed as a result. Virginia provides for the noncharging of up to 4 weeks of benefits paid to an individual who is unable to work due to a disaster declared by the governor. In Louisiana, benefits paid under the Self Employment Assistance program are not charged to the individual employer but recouped through a social charge to all employers. In North Carolina benefits are not charged to employer accounts if paid to an individual who separated from work or refused a job because of undue family hardship such as being unable to obtain adequate childcare or elder care. In Oregon the employer is not charged for benefits paid to an individual without any disqualification with respect to a discharge for being unable to satisfy a job prerequisite required by law or administrative rule. Connecticut has a provision for canceling specified percentages of charges if the employer rehires the worker within specified periods. In Kansas, an employer’s account is not liable if benefit charges are $100 or less. Texas has provisions for noncharging benefits when the individual left work to attend approved training, was called to active military service, or if individual quit to follow military spouse to new duty station. Maine, South Dakota, Virginia, and Wyoming provide noncharging of benefits paid for unemployment directly resulting from reinstatement of another employee upon his/her completion of uniformed service duty, and Illinois noncharges an employer’s account for benefit payments to individuals unemployed during the period that the employer’s business is closed solely because of the entrance of the employer, one or more of the partners or officers of the employer, or the majority stockholder of the employer into active duty in the Illinois National Guard or the Armed Forces of the United States.

TAXES PAYABLE TO UNEMPLOYMENT FUND
The requirements for rate assignments vary greatly among the states. Each state law incorporates at least the federal requirements for assigning reduced rates. Many states require that all necessary contribution reports must have been filed and all contributions due must have been paid. Taxes not paid into the state’s unemployment fund are listed later in this chapter under the heading “Additional Taxes.” RATES AND RATE SCHEDULES—Schedules are used to convert the results of the formula used (that is, the reserve-ratio, benefit-ratio, benefit-wage-ratio or payroll variation) into a tax rate. In a few benefit ratio states, the benefit ratio is itself the employer’s rate. Several states use an “array” system where employers are annually ranked against each other, rather than through a schedule using predetermined experience levels. Rate classes in array systems are determined by segregating wages paid by all state employers. For example, the highest rate class will consist of employers with the highest costs. A new rate class will be triggered when employers in the highest class represent a certain percentage of the wages paid under state law. The following states use array systems: Alaska, Idaho, Kansas, Maine, Montana, Nebraska, North Dakota, Oregon, Utah, and Vermont. MINIMUM AND MAXIMUM RATES—Tax rates depend on the state’s fund balance. In most states, low balances trigger schedules with higher rates and higher balances trigger schedules with lower rates. However, under Federal law, the maximum rate must always be at least 5.4%. Note: The following table indicates the range of base contribution rates provided for in state law. It does not indicate what rates are in effect for the current year. For that information, the appropriate state UI agency should be contacted. 2-16

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In some states, the state law establishes an overall contribution rate that is the sum of various components, such as a basic contribution rate, a solvency rate, and social cost add-on. These states are contained in the following table. Solvency taxes and social cost taxes that are treated by state law as distinctly separate taxes and that are added-on the after the contribution rate has been calculated are listed in Table 2-11.

Table 2-10: FUND REQUIREMENTS AND RANGE OF RATES (Payroll used is that for last year except as indicated) State AL 1/ 2/ AK 3/ AZ AR CA 4/ CO CT DE DC FL 4/ GA HI 1/ ID Most Favorable Schedule Range Of Rates Fund Must Equal At Least Minimum Maximum 125% of desired level Law authorizes agency to set rates 12% of taxable payrolls 5% of payrolls 1.8% of taxable payrolls $450 million More than 0.8% of payrolls Dependent upon the state experience factor 3.0% of payrolls Current adjusted benefit ratio State-wide reserve ratio of 2.7% Ratio of the current reserve fund to the adequate reserve fund is > 1.69 State calculated average high cost multiple Dependent upon the adjusted state experience factor 0.2% Not Specified 0.02% 0.0% 0.1% 0.0% 0.5% 0.1% 0.1% 0.1% 0.01% 0.0% 0.18% 5.4% ≥5.4% 5.4% 5.9% 5.4% 5.4% 5.4% 8.0% 5.4% 5.4% 5.4% 5.4% 5.4% 6.4%, except “small” employers capped at 5.4% 5.4% 7.0% 7.4% 9.0% 6.0% 5.4% 7.5% 7.8% Least Favorable Schedule Range Of Rates When Fund Balance Is Less Than Minimum Maximum 70% of desired level Law authorizes agency to set rates 3% of taxable payrolls 0.4% of payrolls 0.6% of taxable payrolls $0 Less than 0.8% of payrolls Dependent upon the state experience factor 0.8% of payrolls Current adjusted benefit ratio State-wide reserve ratio of 1.25% Ratio of the current reserve fund to the adequate reserve fund is < 0.2 State calculated average high cost multiple Dependent upon the adjusted state experience factor 0.65% Not Specified 0.1% 0.9% 1.5% 1.0% 1.9% 5/ 0.1% 1.9% 0.1% 0.03% 2.4% 0.96% 6.8% ≥5.4% ≥5.4% 6.8% 6.2% 5.4% 6.8% 5/ 8.0% 7.4% 5.4% 7.29% 5.4% 6.8% 9.6% except “small” employers capped at 5.4% 5.6% 9.0% 7.4% 10.0% 6.0% 8.71% 13.5% 15.4%

IL

0.2%

0.3%

IN 4/ IA KS KY LA ME MD MA

2.25% of payrolls Current reserve fund ratio/highest benefit cost ratio ≥ 1.3 Dependent upon state adjustment factor $350 million $1.4 billion Reserve multiple of over 1.83 Exceeds 5% of taxable payrolls 1.75% of taxable payrolls

0.1% 0.0% Not Specified 0.3% 0.09% 0.47% 0.30% 0.8%

1.0% of payrolls Current reserve fund ratio/ highest benefit cost ratio < 0.3 Dependent upon state adjustment factor $150 million $750 million Reserve multiple of under 0.25 ≤3.0% of taxable payrolls 0.5% of taxable payrolls

1.1% 0.0% Not Specified 1.0% 0.3% 1.01% 2.2% 1.58%

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Table 2-10: FUND REQUIREMENTS AND RANGE OF RATES (Payroll used is that for last year except as indicated) State MI 4/ MN MS 4/ MO MT NE NV NH NJ 8/ NM NY NC ND OH 1/ OK OR 9/ PA PR RI 4/ 10/ SC 11/ SD 4/ TN TX UT 12/ VT 1/ VA VI WA WV Most Favorable Schedule Range Of Rates Fund Must Equal At Least Minimum Maximum Based on benefit ratio 6/ 0.75% of payrolls Depends on statutory variables that comprise the general experience rate $750 million 2.45% of payrolls No requirements for fund balance in law Not specified $275 million 1.4% of taxable wages in prior year 3.7% of payrolls 5% of payrolls 9% of taxable payrolls Rates set by agency in accordance with authorization in law 30% above minimum safe level 3.5 x 5-year average of benefits 200% of fund adequacy % ratio Law authorizes agency to set rates $589 million 6.4% of payrolls Statewide reserve ratio of 2.0% $2 million $750 million Based on benefit ratio Reserve factor calculation equals 0.5 2.5 x highest benefit cost rate Fund balance factor of 120% Ratio of current balance to adequate balance exceeds 2 No requirements for fund balance in law 3.0% of gross covered wages 0.06% 0.1% 0.1% 0.0% 0.0% Not specified 0.25% 0.1% 0.1825% 0.03% 0.0% 0.0% 0.1% 0.0% 0.2% 0.5% 0.3% 1.0% 0.6% 0.54% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 10.3% 9.0% 5.4% 5.4% 6.37% 5.4% 5.4% 6.5% 5.4% 5.4% 5.9% 5.7% Not specified 6.3% 5.5% 5.4% 7.7% 5.4% 7.0% 5.4% 8.5% 10.0% 6.0% 9.0% 5.4% 5.4% 6.0% 5.4% 8.5% Least Favorable Schedule Range Of Rates When Fund Balance Is Less Than Minimum Maximum Based on benefit ratio 6/ 0.55% of payrolls Depends on statutory variables that comprise the general experience rate $350 million 0.25% of payrolls No requirements for fund balance in law Rates set by agency in accordance with authorization in law $225 million ≤0.49% of taxable wages in prior year 1% of payrolls 0% of payrolls 2.0% of taxable payrolls Rates set by agency in accordance with authorization in law 60% below minimum safe level 2 x 5-year average of benefits Fund adequacy % ratio less than 100% Law authorizes agency to set rates $370 million 2.75% of payrolls Statewide reserve ratio of 1.4% $2 million $450 million Based on benefit ratio Reserve factor calculation equals 2.0 1.0 x highest benefit cost rate Fund balance factor of 50% Ratio of current balance to adequate balance exceeds 0.2 No requirements for fund balance in law 1.75% of gross covered wages 0.06% 0.4% 0.1% 0.0% 1.67% Not specified 0.25% 0.1% 1.1825% 2.7% 0.9% 0.0% 0.1% 0.3% 0.5% 2.2% 0.3% 2.5% 1.9% 1.24% 1.5% 0.5% 0.0% 0.0% 1.3% 0.1% 0.0% 0.0% 1.5% 10.3% 9.3% 5.4% 7.8% 7/ 6.37% 5.4% 5.4% 6.5% 7.7% 5.4% 8.9% 5.7% Not specified 8.9% 5.5% 5.4% 7.7% 5.4% 10.0% 6.1% 10.0% 10.0% 6.0% 9.0% 8.4% 6.2% 6.0% 5.4% 8.5%

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Table 2-10: FUND REQUIREMENTS AND RANGE OF RATES (Payroll used is that for last year except as indicated) State WI Most Favorable Schedule Range Of Rates Fund Must Equal At Least Minimum Maximum $1.2 billion 0.0% 8.9% Least Favorable Schedule Range Of Rates When Fund Balance Is Less Than Minimum Maximum $300 million 0.27% 8.9%

WY 4% of payrolls 0.0% 10.0% 3.5% of payrolls 0.0% 10.0% 4/ GENERAL NOTE: Table 2-10 incorporates the various methods of determining the minimum and maximum rates under the least and most favorable circumstances. In some states, these calculations include adjustments for solvency and social cost after the rate. 1/ Desired level in AL is 1.4 x the product of the highest payrolls of any 1 of the most recent preceding 3 FYs multiplied by the highest benefits payroll ratio for any 1 of the 10 most recent FYs. In HI, adequate reserve fund defined as 1.5 x highest benefit cost rate during past 10 years multiplied by total taxable remuneration paid by employers in same year. In OH, minimum safe level defined as an amount equal to 2 standard deviations above the average of the adjusted annual average weekly unemployment benefit payment from 1970 to the most recent CY prior to the computation date. In VT, highest benefit cost rate determined by dividing: the highest amount of benefits paid during any consecutive 12-month period in the past 10 years by total wages during the 4 CQs ending within that period. 2/ In AL, through the first calendar quarter of 2008, the rates of contributions are adjusted resulting in effective rates ranging from 0.14% - 6.74%. 3/ In AK, the employers rate is calculated by multiplying 80% of the average benefit cost rate by the employer’s experience factor; however, employers in the maximum rate class may not have a rate lower than 5.4%. 4/ Social costs included in calculation of basic tax rate. See Table 2-11 for states with other social cost adjustments. 5/ In CT, if the fund balance calculations result in a less than 0.8%, a fund balance tax rate of up to 1.4% is levied. 6/ In MI, the rate is made of three components: chargeable benefit component (CBC), account building component (ABC), and the nonchargeable benefit component. 7/ In MO, during 2007 employers at the maximum tax rate are subject to a 40% adjustment to the basic schedule, resulting in an 8.4% rate. 8/ In NJ, fund reserve ratio defined as fund balance as of 3/31 as a percentage of taxable wages in prior year. 9/ In OR, during the first quarter of each odd-numbered year, the least favorable schedule will range from 2.17 percent to 5.4 percent and the most favorable schedule will range from 0.47 percent to 5.4 percent. 10/ In RI, rates are reduced by 0.21% to offset the job development assessment. 11/ In SC, rates are reduced by 0.06% to offset the employment security administrative contingency assessment. 12/ In UT, an employer’s benefit ratio is multiplied by the annual reserve factor (based upon fund solvency) to determine their base tax rate.

LIMITATION ON RATE INCREASES—Wisconsin prevents sudden increases of rates for individual employers by limiting an employer's rate increase in any year to no more than 2 percent higher than the previous rate. In Oklahoma, for employers with rates of 3.4 percent or more, the limitation on the rate increase is 2 percent in any year. For employers with rates below 3.4 percent, their rate may not be increased to more than 5.4 percent in any year. ADJUSTMENTS— Table 2-10 did not include solvency taxes and social cost taxes that are treated by state law as distinctly separate taxes from the employer’s contribution rate. The following table lists taxes that are either:
• •

Based on the balance in a state’s unemployment fund (commonly called a solvency tax), or Based on unrecovered benefit costs, such as noncharged benefits or ineffectively charged benefits (commonly called a socialized cost).

These adjustments may be in the form of a direct modification of the employer’s tax rate (for example, by adding 0.1% to the employer’s tax rate) or by taking these costs into account when calculating the employer’s experience rate (for example, charging a prorated portion of socialized costs to the employer’s account in a reserve ratio state). Reimbursing employers are exempted from solvency adjustments since they may already reimburse the state’s unemployment fund for 100% of their benefit costs. Please note that depending upon the solvency of a state’s fund, and other factors in state law, not all adjustments listed below are levied in a given year.

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Table 2-11: ADJUSTMENTS FOR SOLVENCY OR SOCIAL COST RECOUPMENT Amount Purpose varies Social Cost -0.4% - 1.1% Solvency varies Solvency CO 0.22% Social Cost DE 0.2% Solvency IL 0.8% Solvency varies 6/ Social Cost LA varies Solvency 0.0% to 14.0% Solvency MN 0.0% or 0.1% Solvency ND 0.0% to 1.0% Solvency NE 0.0% to 1.0% Solvency NH 0.0% or 0.5% Solvency NJ 10% of rate Solvency NY 0.0% to 0.925% Solvency OH 0.0% to 0.5% Social Cost OK 0.0% to 33⅓% Solvency 0.0% to 1.5% Social Cost PA Surcharge adjustment from -1.3% to 7.2% and Solvency additional contributions from 0.0% to 0.6% RI Solvency Surtax 0.0% or 0.3% Solvency Replenishment Rate varies Social Cost TX Deficit Assessment up to 2.0% Solvency UT Social Tax Rate at least 0.1% Social Cost Fund Building Rate 0.0% or 0.2% Solvency VA Pool Cost Rate varies Social Cost Social Cost Factor 78%-120% of social cost rate Social Cost WA Solvency Surcharge 0.0% to 0.2% Solvency WI Solvency Rate 0.0% to 1.7% Social Cost GENERAL NOTE: Social cost recoupments are generally payable each year. Solvency adjustments are triggered by fund balances. 1/ Excludes new employers. 2/ For states with benefit ratio systems, a social charge/solvency ratio is calculated by dividing total social charges/solvency charges by total taxable wages. This ratio is added to the individual employer’s benefit ratio to determine the experience rate. 3/ In AL, during years when schedule A is in effect, employers at the minimum rate are excluded; and during years when schedule B is in effect employers at the minimum rate who have not had any benefit charges in the last 3 fiscal years are excluded. 4/ In CO, ½ of proceeds from the surcharge tax are treated as payable to the unemployment fund; the remainder is deposited in the employment support fund which pays for program administrative costs (see Table 2-17). 5/ In LA, depending upon the procedure in place in a given year, the formula for calculating the social charge rate varies. One of these variables includes a provision for a portion of the proceeds to be treated as payable to the Workforce Development Training account when the fund balance equals or exceeds $1 billion (see Table 2-17). 6/ In LA, the social charge rate is calculated to the nearest .01% and may not raise an employer’s total rate above 6.2%. 7/ In PA the surcharge adjustment is applicable to all contributory employers; new employers are excluded from the additional contributions. State AL AK Name Shared Cost Assessment 1/ 2/ 3/ Solvency Adjustment 1/ Solvency Tax Surcharge Surcharge Tax Rate 4/ Supplemental Assessment Rate Fund Building Factor Social Charge Tax 5/ Solvency Tax Additional Assessment Rate Falling Fund Adjustment Excess Payroll Adjustment Emergency Solvency Surcharge Additional Contribution Solvency Addition Subsidiary Contribution Mutualized Contributions Temporary Surcharge Social Cost Adjustment 1/ Solvency Measures 7/

COMPUTATION, FUND TRIGGER, AND EFFECTIVE DATES AND NEW EMPLOYERS—The computation date is the end of the period used to determine the employer’s experience. For example, a benefitratio state may compute an employer’s experience rate using the benefits paid in the 3 years immediately preceding the computation date. If a new or newly covered employer has accrued sufficient experience as required under state law as of the computation date, the employer will henceforth be assigned a rate based on experience. Under the FUTA, experience rates must be effective within 27 weeks of the computation date. The fund trigger date is the date the fund’s balance is determined for purposes of determining which rate schedule is used for the following tax year.

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All state laws contain provisions describing the treatment of employers who are not eligible for experience rates. To conform with federal law, all states assign employers with 3 years of experience a rate based on experience. Federal law allows states to reduce the experience period to no less than one year before assigning rates based on experience and allows states to assign new employer rates on a “reasonable basis,” but not less than 1%. Typically, states assign either a flat rate to all new employers or a rate based on the new employer’s industry type. In some states, these two methods are combined. Most new employers receive a flat rate, while some high-cost industries, such as construction, receive the higher industry rate. In some cases, the flat rate varies from year to year, depending on such factors as the fund’s balance.
Table 2-12: COMPUTATION, FUND TRIGGER, AND EFFECTIVE DATES AND NEW EMPLOYERS State AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV Computation Date June 30 June 30 July 1 June 30 June 30 July 1 June 30 Oct. 1 June 30 June 30 June 30 Dec. 31 June 30 June 30 June 30 July 1 June 30 Oct. 31 June 30 June 30 July 1 Sept. 30 June 30 June 30 June 30 June 30 Sept. 30 Dec. 31 June 30 Fund Trigger Date Sept. 30 Sept. 30 July 31 June 30 Sept. 30 July 1 June 30 Sept. 30 Sept. 30 June 30 June 30 Nov. 30 Sept. 30 June 30 Sept. 30 July 1 June 30 Dec. 31 Sept. 1 Sept. 30 Sept. 30 Sept. 30 June 30 June 30 Nov. 1 Oct 1 4/ Oct. 31 May 31 4/ June 30 Effective Date For New Rates Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 1 2 1 1 1 3 1/ Years Needed To Qualify For Experience Rating 1/ 1 1 1/ 1 3 1 1 1 1/ 2 3 2½ 3 1 1 3 1/ 3 1/ 3 2 3 3 2 2 1 3/ Reduced Rate For New Employers 2/ 2.7% 4.15% 2.0% 2.9% 3.4% Greater of 1.7%, actual rate, or, for construction industry, average industry rate 3.1% 2.3% 2.7% or average rate for all employers, if higher 2.7% 2.7% 1.9% 1.67% 3.1% or average industry rate if greater 2.7%; 1.0% for government employers 1.0% 4.62% or average industry rate, if higher 2.7% Foreign & domestic contruction firms receive maximum rate Up to 6.2% based on average industry rate 1.8% 2.4% Foreign contractors assigned average industry rate 2.53% 2.7% Construction employers receive average industry rate 2.32% 2.7% Greater of 2.7% or rate assigned to employer’s industrial classification Average industry rate 1.6% 2.95%

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Table 2-12: COMPUTATION, FUND TRIGGER, AND EFFECTIVE DATES AND NEW EMPLOYERS State NH NJ NM NY NC ND OH OK OR PA PR RI SC SD TN TX UT VT VA VI WA WV WI WY Computation Date Jan. 31 Dec. 31 June 30 Dec.31 Aug. 1 Sept. 30 July 1 Dec. 31 June 30 June 30 June 30 Sept. 30 July 1 5/ Dec. 31 Dec. 31 Oct. 1 5/ July 1 Dec. 31 June 30 Dec. 31 July 1 June 30 June 30 June 30 Fund Trigger Date Jan. 31 4/ Mar. 31 June 30 Dec. 31 July 31 Sept. 30 July 1 Dec. 31 Aug. 31 June 30 Dec. 31 Sept. 30 July 31 4/ Dec. 31 Dec. 31 4/ Oct. 1 June 30 Dec. 31 June 30 June 30 Sept. 30 Jan. 1 Sept. 30 Oct. 31 Effective Date For New Rates July 1 July 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 5/ Jan. 1 July 1 Jan. 1 5/ Jan. 1 July 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Years Needed To Qualify For Experience Rating 1/ 1 3 3 1 2 3 1 1 1 1½ 1/ 1 3 2 1/ 2 3 1 1 1 1 3 2 1/ 3 1½ 3 Reduced Rate For New Employers 2/ 2.7% 2.6825% 2.0% Highest rate assigned to employers with positive account balances or 3.4%, whichever is less 1.2% 1.6% 2.7%, except construction employers pay industry average rate 1.8% 2.4% 3.5%; Construction employers pay 9.2% 2.7% - 3.4% depending upon the tax schedule in effect Higher of 1.0% or the five year benefit cost rate for non-rateable employers up to a maximum of 4.2% 2.64% 1.2% for first year; 1.0% for second if positive balance 2.7%, except average industry rate when industry reserve ratio is 0.0% or less Greater of 2.7% or industry rate Average industry rate up to 9.5% Lower of average industry rate or rate class eleven, but not less than 1% 6/ 2.5% 1.0% 115% of industry average rate 2.7%, Construction and foreign entities pay 7.5% 3.25% or 3.4% Average industry rate

1/ Period shown is period throughout which employer’s account was chargeable or during which payroll declines were measurable. In states noted, requirements for experience rating are stated in the law in terms of subjectivity, AK, CT, IN, and WA; in which contributions are payable, IL and PA; coverage, SC; or in addition to the specified period of chargeability, contributions payable in the 2 preceding CYs, NE. 2/ When rate varies, it must be no less than 1%. Rates generally do not include add-on solvency or other taxes. 3/ An employer’s rate will not include a nonchargeable benefits component for the first 4 years of subjectivity. 4/ MO uses a calculation based on the average balance of the 4 CQs. In NE, May 30 is the last day the administrator decides the next year’s tax rate based on quarterly trust fund balances of preceding year. NH can also use quarterly trust fund levels to activate quarterly changes in tax rates. In SC, trust fund balance is taken as of June 30 & divided by total payroll as of Sept. 30 of same year. TN can also use June 30 trust fund balance to activate a 6-month tax schedule. 5/ In SC and TX, for newly-qualified employer, computation date is end of quarter in which employer meets experience requirements and effective date is immediately following quarter. 6/ Exception: Foreign corporations classified in 236, 237, or 238 North American Industry Clasification System code shall pay the average rate as of most recent computation date paid by all employers so classified.

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RATE REDUCTION THROUGH VOLUNTARY CONTRIBUTIONS—In about half of the states, employers may obtain lower rates by making voluntary contributions. In reserve ratio states, a voluntary contribution increases the balance in the employer's reserve so that a lower rate is assigned which will save more than the amount of the voluntary contribution. In benefit-ratio states, an employer pays voluntary contributions to cancel benefit charges to its account, thereby reducing its benefit ratio.
Table 2-13: STATES PERMITTING RATE REDUCTION THROUGH VOLUNTARY CONTRIBUTIONS State AZ AR On or before January 31. Within 90 days from the beginning of the rate year. By last working day in March in calendar year to which reduced rate would apply. Before March 15. Within 30 days following the date upon which a notice is mailed. Within 30 days of receipt of rate notice. Within 30 days of mailing of rate notice. Within 20 days following mailing of rate notice. Within 30 days of mailing of notice of benefits charged to employer's experience rating account. Within 30 days of mailing of rate notice. Can be extended for 10 days for good cause. No later than 30 days after date of issuance of notice of employer's contribution rate. Within 30 days of mailing of notice of adjusted contribution rate. Within 30 days of mailing of rate notice. On or before following January 15. Before January 10. Within 30 days of mailing of employer's rate notice. May be extended 60 days for good cause. If contribution not made within extended period, employer becomes subject to a penalty of 5% or $5.00, whichever is greater, up to $50.00. On or before March 1. On or before April 1. Within 30 days of mailing of rate notice. Within four months of beginning of year. By December 31 following computation date. Within 30 days of mailing of rate notice. Can extend for good cause. Before February 1. Due Date 1/ Additional Information 2/ No additional information. Not permitted if rate increased because of knowingly violating/attempting to violate state law regarding transfers of experience and assignment of rates. Cannot reduce by more than 3 rates. Employer must not have negative account balance or not have any unpaid amounts owed. Not allowed for any year in which Schedule E or F or emergency solvency surcharge in effect. (Ineffective in 2006.) No additional information. No additional information. No additional information. No rate may be reduced more than five rate groups for positive balance employers. Negative balance employers may have their rates reduced to the highest five rates for positive balance employers. No additional information. May not be permitted if solvency tax, advance interest tax, or special assessment to finance bonds used to prepay Federal loan is assessed. No additional information. Employer must be assigned contribution rate, file all required reports, and pay all contributions, interest, penalties due. No additional information. Contribute up to amount of benefits charged to account during period ending June 30 of preceding year plus 25% surcharge. Not refundable unless request made in writing within 30 days of mailing of notice of new tax rate. Must not be delinquent in any amount. Employer must be eligible for experience rate and must include signed written statement identifying it as voluntary payment. Limited to amount likely to reduce one rate category. If employer transfers all/part of business to a successor in interest and both parties at time of transfer are under common ownership or control, neither may make voluntary transfers in year of transfer and the following year. No additional information. No additional information. No additional information. No additional information. No additional information. No additional information. No additional information.

CA CO GA IN KS KY LA ME MA MI MN MO NE NJ NM NY NC ND OH PA SD

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Table 2-13: STATES PERMITTING RATE REDUCTION THROUGH VOLUNTARY CONTRIBUTIONS State TX Due Date 1/ No later than 60 days after mailing date of rate notice. May extend an additional 15 days. If payment insufficient to cause decrease in employer's rate, Commission will notify employer and grant an extension, not to exceed total of 75 days. By February 15. Within 30 days of mailing of rate notice. Additional Information 2/ No additional information. May contribute part or all benefits charges from most recent 2 years ending June 30. Only eligible if tax rate increased at least 12 rate classess from prior tax rate year. No additional information.

WA WV WI

During November or, if mailed, either postmarked by November 30 or Can only lower one rate. Not available if employer has outstanding tax liabilities. Not available for 5 years for certain employers whose received no later than three days following that date. Under certain benefit charges exceed their contributions. circumstances, can pay up to 120 days after beginning of calendar year. 1/ Federal law requires that voluntary contributions must be made “prior to the expiration of 120 days after the beginning of the rate year” (Section 3303(d), FUTA). This column contains additional state limitations for the voluntary contribution to effect the applicable rate year. 2/ Since Federal law limits refunds to erroneous payments, if a voluntary contribution does not lead to a reduced rate or if an employer changes its mind, no refund can be made.

TRANSFER OF EMPLOYERS' EXPERIENCE
Because of federal requirements, no rate can be granted based on experience unless the state has at least a 1-year record of the employer's experience with the factors used to measure unemployment. Without such a record there would be no basis for rate determination. For this reason, all state laws specify the conditions under which the experience record of a predecessor employer may be transferred to an employer who, through purchase or otherwise, acquires the predecessor's business. In some states, the authorization for transfer of the record is limited to total transfers; i.e., the record may be transferred only if a single successor employer acquires the predecessor's organization, trade, or business and substantially all its assets. In other states, the provisions authorize partial as well as total transfers; in these states, if only a portion of a business is acquired by any one successor, that part of the predecessor's record which pertains to the acquired portion of the business may be transferred to the successor. In most states, the transfer of the record in cases of total transfer automatically follows whenever all or substantially all of a business is transferred. In the remaining states, the transfer is not made unless the employers concerned request it. Under most laws, transfers are made whether the acquisition is the result of reorganization, purchase, inheritance, receivership, or any other cause. Delaware, however, permits transfer of the experience record to a successor only when there is substantial continuity of ownership and management. Some states condition the transfer of the record on what happens to the business after it is acquired by the successor. For example, in some states there can be no transfer if the enterprise acquired is not continued; in 3 of these states (California, District of Columbia, and Wisconsin) the successor must employ substantially the same workers. In 22 states,2 successor employers must assume liability for the predecessor's unpaid contributions, although in the District of Columbia, Massachusetts, and Wisconsin, successor employers are only secondarily liable.

Most states establish by statute or regulation the rate to be assigned the successor employer from the date of the transfer to the end of the rate year in which the transfer occurs. The rate assignments vary with the
2

AZ, AR, CA, DC, GA, ID, IL, IN, KY, ME, MA, MI, MN, MO, NE, NH, NM, OH, OK, SC, WV and WI. 2-24

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status of the successor employer prior to the acquisition of the predecessor's business. Over half the states provide that an employer who has a rate based on experience with unemployment shall continue to pay that rate for the remainder of the rate year; the others, that a new rate be assigned based on the employer's own record combined with the acquired record. To address concerns regarding employers who avoid liability for UI benefits charged to their accounts through the manipulation of payrolls, Congress enacted the SUTA Dumping Prevention Act of 2004 (“SUTA” refers to state unemployment tax acts.). This Act required state UI laws to provide:

for mandatory transfers of experience where there is substantial commonality of ownership,
management, or control at the time of acquisition of trade or business; and
for no transfers of experience where the acquiring party is not otherwise an employer at the time of acquisition and where the state agency finds that acquiring the business was solely or primarily for the purposes of obtaining a lower rate of contributions.

In all other situations, it is left to the states to determine the circumstances under which experience may be transferred. The following table provides information about state UI law provisions in these other situations.

Table 2-14: TRANSFER OF EXPERIENCE FOR EMPLOYER RATES Rate For Successor Who Was An Employer Prior To Acquisition For Remainder Of Rate Year Previous Rate Experience Combined X

Total Transfers State Mandatory AL AK AZ AR CA CO CT X By agency interpretation. Only if there is substantial continuity of ownership & management. X X X X X X X X X Optional

Partial Transfers

Enterprise Must Be Continued X

Mandatory

Optional

X
X X X X By agency interpretation. Only if there is substantial continuity of ownership & management. X X X X X By agency interpretation. X X X X X

DE

DC 1/ FL GA HI

X X X X X

X X X X

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Table 2-14: TRANSFER OF EXPERIENCE FOR EMPLOYER RATES Rate For Successor Who Was An Employer Prior To Acquisition For Remainder Of Rate Year Previous Rate Experience Combined

Total Transfers State Mandatory Only if predecessor had a deficit as of last computation date and management or ownership is substantially the same. 2/ Optional

Partial Transfers

Enterprise Must Be Continued

Mandatory

Optional Only if predecessor had a deficit as of last computation date and management or ownership is substantially the same. X

ID

2/

X

X

IL

X

Successor receives predecessor's lower rate if agency is notified within 120 days. X X X X X X X

IN IA KS KY LA ME 3/ MD MI MN MS MO

X X X X X X X X X X X Except if successor was not an ER (by regulation). X X X X If predecessor and successor were owned or controlled by same interest. Limited to acquisitions of all or substantially all of business. Except if successor was not an ER (by regulation). X X X

X

X

X

Limited to firms formerly located in another state. X

X

X X

X

X X X X X X

MT NE MA NV NH

X X X X X If predecessor and successor were not owned or controlled by same interest. X X Limited to total transfers only. X X X

NJ

X

X

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Table 2-14: TRANSFER OF EXPERIENCE FOR EMPLOYER RATES Rate For Successor Who Was An Employer Prior To Acquisition For Remainder Of Rate Year Previous Rate X X X X If predecessor and successor were owned or controlled by same interest. X If predecessor and successor were not owned or controlled by same interest. X X X X X Experience Combined

Total Transfers State Mandatory NM NY NC 4/ ND 1/ X X X Optional

Partial Transfers

Enterprise Must Be Continued X

Mandatory

Optional

X

OH

X

X

X

OK OR

X X Except as noted in next column. X X X 5/ Except as noted in next column. X X X X X X X X X X X X Limited to acquisitions of substantially all of a business. X X X If ownership of both entities is not substantially the same. X X X 5/ If predecessor and successor were not owned or controlled by same interest. Except as noted in next column.

X X

X

PA

If predecessor and successor were not owned or controlled by same interest.

X

X

PR RI SC SD

X X X X X X

TN TX UT VI VT VA WA WV WI WY

X X X

X X X X

X X

X

X X X X

X

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Table 2-14: TRANSFER OF EXPERIENCE FOR EMPLOYER RATES Rate For Successor Who Was An Employer Prior To Acquisition For Remainder Of Rate Year Previous Rate

Total Transfers State Mandatory Optional

Partial Transfers

Experience Combined 1/ In DC, if total wages allocable to transferred property are less than 25% of predecessor's total; and in ND, transfer may be denied if good cause shown that transfer would be inequitable. 2/ If management, ownership, or control is substantially the same for the successor as for the predecessor and there is a continuity of the business activity by the successor. 3/ Any business purchased free and clear of liens through bankruptcy will receive the state average contribution rate, if contribution rate for the predecessor business is greater than the state average; otherwise, the successor business assumes the predecessor’s experience. 4/ In NC, no transfer when assets of predecessor are acquired in a sale in bankruptcy, unless successor employing unit shares common ownership with predecessor. 5/ If the predecessor’s experience rated account has a debit balance and when there is an acquisition or change in the form or organization of an existing business enterprise, or severable portion thereof, and there is a continuity of control of the business enterprise. Mandatory Optional

Enterprise Must Be Continued

ADDITIONAL TAXES
This section discusses various payroll taxes that are not deposited in the state’s unemployment fund. In general, it is limited to those taxes where state law contains a current taxing authority; taxes which by statute could be assessed only for a temporary period in the past are not included. Reserve funds where the taxing authority has expired are, however, listed when the reserve fund continues to exist. As will be noted from the following tables, not all states have additional taxes and not all of these apply to all employers. Loan and Interest Repayment Taxes — Some states have the authority to float bonds to pay benefit costs, thereby avoiding or repaying federal loans. In these states special taxes may be assessed to pay off the bond as well as any costs associated with the bond. Finally, since interest must be paid on federal advances and since interest may not be paid from the state’s unemployment fund, several states have established special taxes to pay the costs of this interest.
Table 2-15: STATES WITH LOAN AND INTEREST REPAYMENT TAXES State AL AR Tax Additional rate Advance interest tax Advance interest CO Bond assessment Rate determined based on amount due. Not specified. Assessment is a % of ER’s charged tax rate. Rate determined based on amount due. 2/ Rate determined based on amount due. 2/ When bonds are outstanding. Amount 1/ Rate determined based on amount due. 2/ 0.2% Rate determined based on amount due. 2/ When Payable By May 15 following year interest becomes due. When interest is due on federal advances. When interest is due on federal advances.
th

Specific Purposes Pay interest on federal advances. Pay interest on federal advances. Pay interest on federal advances. Pay bonds issued to U C, federal advances, & bond costs. Pay bonds issued to pay UC, federal advances, & bond costs. Pay interest on federal advances. Pay interest on federal advances.

Bond assessment CT Special assessment Temporary emergency assessment

When bonds are outstanding. When interest is due on federal advances. When interest is due on federal advances.

DE

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Table 2-15: STATES WITH LOAN AND INTEREST REPAYMENT TAXES State ID IA LA ME MA MN Tax Advance interest repayment tax Temporary emergency surcharge Bond repayment assessment Special assessment Secondary adjustment payment Special assessment Advance interest MO Bond and loan assessment Interest assessment surcharge Advance interest tax Advance interest repayment tax Advance interest tax Advance interest tax Interest tax Unemployment obligation assessment Interest payment tax Amount 1/ Rate determined based on amount due. 2/ Rate determined based on amount due. 2/ 1.4% on $15,000 wage base. 2/ Rate determined based on amount due. 2/ 0.3% - 0.9% 2% to 8% of quarterly taxes. Rate determined based on amount due. 2/ Rate determined based on amount due. Rate determined based on amount due. Rate determined based on amount due. 2/ Rate determined based on amount due. 2/ Up to 1.0% 2/ Rate determined based on amount due. Rate determined based on amount due. 2/ Based on amount due. 2/ 0.15% 2/ 0.35% on EEs, % on ERs on $21,000 tax wage base to = EE assessment. When Payable When interest is due on federal advances. If interest is due on federal advances. If bonds are outstanding. When interest is due on federal advances. If fund balance is insufficient. When interst is due on federal advances. When interest is due on federal advances. When bonds or loans are outstanding. When interest is due on federal advances. When interest is due on federal advances. When interest is due on federal advances. When interest is due on federal advances. When interest is due on federal advances. When interest is due on federal advances. When bonds or loans are outstanding. Based on balance of interest payment fund and projected interest due. When bonds are outstanding. Specific Purposes Pay interest on federal advances. Pay interest on federal advances. Pay bonds issued to pay federal advances and bond costs. Pay interest on federal advances. Repay federal loans. Pay interest on federal advances. Pay interest on federal advances. Pay principle interest and administrative expenses related to bonds and loans. Pay interest on federal advances. Pay interest on federal advances. Pay interest on federal advances. Pay interest on federal advances. Pay interest on federal advances. Pay interest on federal advances. Interest and cost of bonds. Pay interest on federal advances. Retire bonds used to pay federal advances and cost of bonds.

NY NJ OR PA PR TN TX WA

WV WI

Assessment Federal interest tax 3/

Rate determined based on When interest is due on federal Pay interest on federal amount due. advances. advances. 1/ Percentage figures include percent of taxable payroll, unless otherwise indicated. 2/ Excludes reimbursing ERs in AL, CT, ID, LA, ME, MO, OR, PA, TX, and WA. CO excludes governmental entities, reimbursing nonprofit organizations, political subdivisions electing the special rate, negative balance ERs, and ERs with positive balances of 7.0% or more. NJ excludes reimbursing employers, nonprofit organizations, and governmental entities or instrumentalities. TN excludes ERs with no benefit charges for 2 years and no negative balance for the same 2 years; IA excludes governmental ERs and ERs assigned a zero rate; OR excludes zero rated ERs; DE excludes reimbursing governmental entities or instrumentalities and nonprofit organizations; PA excludes new ERs. In some states, it is not clear whether the tax applies only to contributory employers. 3/ Interest payment is not the sole purpose of interest payment surtaxes in the following states: also for payment of bonds issued to pay federal advances, debt service, administrative costs, LA; also to pay debt service on bonds issued to avoid or pay federal advances, TX; also to retire bonds, WV. 3/ Inoperative unless authorized by the state agency.

Reserve Taxes —These taxes are deposited in a reserve fund established under state law. The principal in the reserve fund is used for UI purposes (such as paying benefits or interest on federal advances). Any interest 2-29

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earned on the reserve fund is deposited in another fund where it is used for other purposes, such as job training and paying the costs of the reserve tax’s collection. Unlike employer contributions, which are held in the Federal Unemployment Trust Fund until needed to pay benefits, these reserve fund moneys are not protected by the federal withdrawal standard which restricts the use of contributions to the payment of benefits and other specified purposes. This means that state legislatures may, if the state constitution allows, redirect the reserve fund’s principle to other uses. Even if the taxing authority has expired, reserve taxes are listed below when the reserve fund continues in existence.

Table 2-16: STATES WITH RESERVE TAXES: PRINCIPAL USED FOR UI PURPOSES, INTEREST USED FOR UI OR NON-UI PURPOSES State ID Surtax Reserve Amount 1/ When Payable If as of September 30th of the preceding year the Reserve Fund balance is < 1% of state taxable wages or <= 49% of the Employment Security Fund. If as of July 1st of the preceding year the Reserve Fund balance is < $150,000,000. When unemployment fund meets specified solvency requirements. 2/ Purpose Loans to the employment security fund, and interest on loans; interest accrued is deposited in the Dept. of Commerce and Labor Special Administration Fund. Pay UI; interest accrued is used for UI & ES administrative costs. Pay UI; interest accrued is deposited into the Jobs Training and Support Fund.

Taxable wage rate less the assigned contribution rate and training tax rate. 0-50% of contributions due, not to exceed $50,000,000 in total contributions annually. 0-20% of contributions due

IA NE

Reserve State UI

If as of August 1st of the preceding year Pay UI or interest on federal advances; the balance of the Reserve Fund is interest accrued is deposited into the NC Reserve Fund 20% of contributions due <$163,349,000 or the balance of the Worker Training Trust Fund. Unemployment Insurance Fund is >$500,000,000. 1/ Percentage figures include percent of taxable payroll, unless otherwise indicated. 2/ The reserve tax is in effect unless any of the following occur: The average balance in the unemployment fund at the end of any three months in the preceding calendar year is greater than one percent of state taxable wages for the same preceding year; the balance in the unemployment fund equals or exceeds thirty percent of the average month end balance of the state's account in the Unemployment Trust Fund for the three lowest calendar months in the preceding year; or the state advisory council determines that a zero percent state unemployment insurance tax rate is in the best interests of preserving the integrity of the state's account in the Unemployment Trust Fund.

Taxes for UI Administration or Non-UI Purposes —States also collect a wide array of taxes which are established for administrative purposes. These purposes may be UI administration, job training, employment service administration, or special improvements in technology. These taxes are not deposited in the state’s unemployment fund, but in another fund designated by state law. Since federal grants for the administration of the UI program may not be used to collect non-UI taxes, almost all legislation establishing non-UI taxes provide that a portion of the revenues generated will be used for payments of costs of collecting the tax. Expired taxes are not listed.

Table 2-17: STATES WITH TAXES FOR UI ADMINISTRATION OR NON-UI PURPOSES State AL AK AZ AR Tax Name Special Assessment State Training & Employment Program Technical & Vocational Education Program Job Training Assessment Extended Benefit Amount 0.06% 2/ 0.1% wages per employee 0.1% wages per employee 2/ 0.1% 0.1% 2/ 1/ When Payable Expires March 31, 2008 Each year Each year CY 2001-2007 When state’s EB account is below 0.2% payroll Purpose Job Search/placement Development of skilled workforce Vocational and technical training Job training Pays noncharged costs of federalstate extended benefits

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Table 2-17: STATES WITH TAXES FOR UI ADMINISTRATION OR NON-UI PURPOSES State CA CO DE Tax Name Surcharge for Employment and Training Fund Surcharge Tax Rate 3/ Blue Collar Job Training Tax Amount 1/ When Payable Each year Each year Rate depends on Unemployment Fund balance Each quarter [Administrative Funding Assessment Account balance limited to $4 million per calendar year.] Same time as other assessments Excludes deficits employers from rate class 6. Expires Jan. 1, 2012 Expires Dec. 31, 2008 When insufficient funds are made available from fed. gov’t When fund balance is > $1.0 billion Each year. Applies to employers with 6 or more employees and 1 year of experience Each year Suspended if fund balance is < $500,000 Each year Each year Each year For contributing employers and workers Each year Remedial Education Catastrophic Illness in Children Relief Fund Customized training grants to employers and unions for incumbent workers, individual training grants for displaced workers, OSHA training grants, youth transition to work grants Automation, re-employment services, administration Employment Department administration Pays last payroll check of bankrupt employers Employment, training, administration Job development Job placement for claimants Purpose Training and administration costs Administration, noncharged benefits Counseling, training, placement of dislocated workers Improve benefit claim eligibility determinations, reemployment services for individuals likely to exhaust benefits, fraud prevention, cost of collecting/administering assessment Employment services & training Training Training Administration Training Medical Security Trust Fund 0.1% (excluding negative balance employers) 0.22% 2/ 0.1% - 0.15% per year of taxable wages

DC

Administrative Funding Assessment Employment & Training Fund Assessment Training Tax Skills 2016 Training Assessment Additional Contribution Social Charge Tax 4/ Unemployment Health Insurance Contribution Workforce Enhancement Fee Workforce Enhancement Contributions Administrative Fund Tax Employment and Training Medical Malpractice Liability Insurance Premium Assistance Fund Supplemental Workforce Fund for Basic Skills Surcharge for Catastrophic Illness in Children Workforce Development Partnership Tax

2.0% of taxable wages.

HI ID IN KY LA MA MN MS MT NV

0.01% of taxable wages 2/ 3.0% of taxable wage rate

0.09% of taxable wages 0.3% Varies 5/ Max. of $1,680 per employee

0.085% 2/ 0.3% of taxable wages 2/ 0.13% 0.05% 2/ $3 per employee 0.0175% $1 per employee

Workforce development Training to enhance productivity Administration Training and job creation

NJ

0.1%

Quarterly for contributing employers and workers

NY OR

Re-Employment Service Fund Administration Tax Wage Security

0.075% 0.09% 2/ 0.03% 2/ 1.0% 2/ 0.21% of taxable wages 2/ 0.06% 2/

Quarterly Each odd-numbered year 1st quarter of every oddnumbered year

PR RI SC

Special Tax Job Development Assessment Admininstrative Contingency Assessment

Beginning tax year 2001 Yearly

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Table 2-17: STATES WITH TAXES FOR UI ADMINISTRATION OR NON-UI PURPOSES State SD TN TX WA Tax Name Investment SD Future fee Job Skills fee Employment Training Investment Assessment Special Employment Administrative Account Assessment WI Administrative Account Contribution
WY

Amount

1/

When Payable Varies according to employers’ reserve ratio When most favorable schedule in effect ($750 million fund balance) Each year Terminates if federal funding increases When agency gives public notice When agency determines need (has never been payable)

Purpose Research and economic development Job skills program Job training Employment assistance UI administration

0 - 0.6% rated employers; 0.05% new employers 2/ 0.15% 6/ 0.1% 0.02% 2/ Lesser of 0.1% or applicable solvency rate 2%, but agency may reduce

UI and ES administration

40% of annual Workforce development program, Each year noncharged/ineffectively administration charged adjustment factor 2/ 1/ Percentage figures include percent of taxable payroll, unless otherwise indicated. 2/ AK, AL, AR, HI, MN, RI, SD, WA, and WY exclude reimbursing ERs; AL excludes new ERs, and ERs assigned the min. rate under schedule A and any ER whose account has not been charged during the 3 preceding FYs but pay the min. rate under schedule B, and also excludes reimbursing ERs, new ERs and ERs paying at least 5.4% but not more than 5.45%; PR excludes governmental entities and political subdivisions; CO excludes governmental entities, reimbursing nonprofit organizations, and political subdivisions electing the special rate, and exempts ERs whose benefit charge account balance for the last 3 FYs is less than $100, and ERs whose benefit charge balance is zero; MS excluded state boards, instrumentalities, and political subdivisions and nonprofit organizations; NV excludes reimbursing ERs and ERs who pay 5.4% or more; OR excludes ERs paying 5.4%; SC excludes nonprofit organizations, certain governmental ERs and ERs paying 5.4%. 3/ In CO, ½ of proceeds from the surcharge tax are deposited in the employment support fund; the remainder is deposited in the unemployment fund see Table 2-11). 4/ In LA, depending upon the procedure in place in a given year, the formula for calculating the social charge rate varies. One of these variables includes a provision for a portion of the proceeds to be treated as payable to the Workforce Development Training account when the fund balance equals or exceeds $1 billion (see Table 2-11). 5/ In LA, the social charge rate is calculated to the nearest .01% and may not raise an employer’s total rate above 6.2%. 6/ Job skills fee applies when the most favorable schedule is in effect. Special Reserve Fund Rate

SPECIAL PROVISIONS FOR FINANCING BENEFITS PAID TO EMPLOYEES OF NONPROFIT ORGANIZATIONS, STATE AND LOCAL GOVERNMENTS, AND INDIAN TRIBES
THE REIMBURSEMENT OPTION—As discussed in the Coverage chapter, amendments made to FUTA in 1970, 1976, and 2000 require coverage of certain services performed for certain nonprofit organizations, state and local governments, and federally recognized Indian tribes. These amendments also require that states permit these entities to elect to make “payments in lieu of contributions” (more commonly called “reimbursements”) to a state’s unemployment fund. Prior to these amendments, states were not permitted to allow nonprofit organizations or Indian tribes to finance their employees' benefits on a reimbursable basis because of the experience-rating requirements of the federal law. Most state laws provide that reimbursing employers will be billed at the end of each calendar quarter, or other period determined by the agency, for the benefits paid during that period which are attributable to service in their employ. A second method, mostly limited to nonprofit organizations, bills the nonprofit at the end of each calendar quarter, or other time period specified by the agency, at a flat rate which is based on a percentage of the organization's total payroll in the preceding calendar year. This method appears to be less burdensome because it spreads benefit costs more uniformly throughout the calendar year. Alabama and North Carolina mandate this second method for nonprofits, while 17 states3 permit a nonprofit the option of choosing either
3

AK, CA, DC, ID, MD, ND, OH, PR, SC, SD, TN, UT, VT, VA, VI, WA, and WV. 2-32

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method, subject to the approval of the state agency. Arkansas is the only state to extend this method beyond nonprofits. Arkansas requires the State of Arkansas to use the first method, while nonprofit organizations and political subdivisions that choose reimbursement must use the second method. Although states may noncharge benefits to reimbursing employers, few do. Unlike contributing employers, who share noncharged benefit costs through such devices as minimum contribution and solvency rates, a reimbursing employer will not fully pay its noncharging costs. Only one state which noncharges benefits to reimbursing employers has developed a system for having such employers bear the costs of such noncharges. In Mississippi, political subdivisions reimbursing the fund may elect to pay 0.5 percent of taxable wages as a condition of having benefits noncharged under the same conditions as contributory employers. State laws permit two or more reimbursing employers jointly to apply to the state agency for the establishment of a group account to pay the benefit costs attributable to service in their employ. This group is treated as a single employer for the purposes of benefit reimbursement and benefit cost allocation. SPECIAL PROVISIONS FOR STATE AND LOCAL GOVERNMENTS—Generally, state laws treat governmental entities the same as nonprofit organizations and Indian tribes for financing purposes. However, treatment of governmental entities differ in the following ways:

The state law may designate the state as a whole as a governmental entity and choose for it the
financing option. (Effectively, the state legislature elects the state’s financing option.)
Governmental entities using the contribution option must or may, depending on state law, use a contributions systems different than those applicable to other employers in the state. (Unlike nonprofit organizations and Indian tribes, the federal experience-rating requirements do not apply to state governments and their political subdivisions.) A governmental entity may be liable for the full amount of extended benefits paid based on
service in its employ. The federal government does not share these costs because governmental
entities do not pay the FUTA tax which pays the federal share. (This extended benefit rule
applies to Indian tribes as well.)

The following table indicates how states treat governmental entities.
Table 2-18: FINANCING PROVISIONS FOR GOVERNMENTAL ENTITIES State AL AK AZ AR CA CO CT DE Reimbursement Reimbursement State’s Method Required By Law Reimbursement Options in Addition to Reimbursement Regular Special Contributions Schedule X X X X X X X X X State NE NV NH NJ NM NY NC ND Reimbursement Reimbursement Reimbursement State’s Method Required By Law Options in Addition to Reimbursement Regular Special Contributions Schedule X X X X X X X X X X X

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Table 2-18: FINANCING PROVISIONS FOR GOVERNMENTAL ENTITIES State DC FL GA HI ID IL 1 IN IA KS KY LA ME MD MA MI MN MS MO MT Reimbursement X X X X X X Reimbursement State’s Method Required By Law Options in Addition to Reimbursement Regular Special Contributions Schedule X X X X X X X X X X X X X X X X X State OH OK OR PA PR RI SC SD TN TX UT VT 2 VA VI WA WV WI WY Reimbursement Reimbursement Reimbursement Reimbursement X X X X X X X X X Reimbursement Contribution Reimbursement Reimbursement X X X X X X X X X State’s Method Required By Law Options in Addition to Reimbursement Regular Special Contributions Schedule X X X

1/ Benefits paid to state employees are financed by appropriation to the state Department of Labor which then reimburses the unemployment compensation fund for benefits paid. 2/ State institutions of higher education have an option of contributions or reimbursement; all other state agencies must reimburse.

California has three separate plans for governmental entities. The state is limited to contributions or reimbursement. Schools have, in addition to those two options, the option of making quarterly contributions of 0.5 percent of total wages to the School Employee's Fund plus a variable local experience charge to pay for “administrative indiscretions.” The Local Public Entity Employee's Fund and School Employee's Fund have been established in the state Treasury to which political subdivisions and schools, respectively, contribute a percentage of their payrolls and from which the state unemployment compensation fund is reimbursed for benefits paid. Kansas and Massachusetts have developed a similar experience-rating system applicable to governmental entities that elect the contributions method. Under this system, three factors are involved in determining rates: required yield, individual experience, and aggregate experience. In Kansas, the rate for 2-34

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employers not eligible for a computed rate is based on the benefit cost experience of all rated governmental employers. In this state, no employer's rate may be less than 0.1 percent. In Massachusetts, the rate for employers not eligible for a computed rate is the average cost of all rated governmental employers but not less than 1 percent. Massachusetts also imposes an emergency tax of up to 1.0 percent when benefit charges reach a specified level. In Montana, governmental entities that elect contributions pay at the rate of 0.4 percent of wages. Rates are adjusted annually for each employer under a benefit-ratio formula. New employers are assigned the median rate for the year in which they elect contributions and rates may not be lower than 0.1 percent or higher than 1.5 percent, in 0.1 percent intervals. New rates become effective July 1, rather than January 1, as in the case of the regular contributions system. New Mexico permits political subdivisions to participate in a “local public body unemployment compensation reserve fund” which is managed by the risk management division. This special fund reimburses the state unemployment fund for benefits paid based on service with the participating political subdivision. The employer contributes to the special fund the amount of benefits paid attributable to service in its employ plus an additional unspecified amount to establish a pool and to pay administrative costs of the special fund. North Dakota political subdivisions contribute to a special fund managed by the Office of Management and Budget. This fund reimburses the state’s unemployment fund for benefits paid based on service with the participating political subdivision. Oregon has a “local government employer benefit trust fund” to which a political subdivision may elect to pay a percentage of its gross wages. The rate is redetermined each June 30 under a benefit-ratio formula. No employer's rate may be less than 0.1 percent nor more than 5.0 percent. This special fund then reimburses the state unemployment compensation fund for benefits paid based on service with political subdivisions that have elected to participate in the special fund and repayments of advances and any interest due because of shortages in the fund. In Tennessee, governmental entities who are contributing employers will pay rates ranging from 0.3 percent to 3.0 percent determined according to its reserve ratio. In Washington, counties, cities, and towns may elect regular reimbursement or the “local government tax.” Other political subdivisions may elect either reimbursement or regular contributions. Rates are determined yearly for each employer under a reserve ratio formula. The following minimum and maximum rates have been established: 0.2 percent and 3.0 percent. No employer's rate may increase by more than 1.0 percent in any year. At the discretion of the Commissioner, an emergency excess tax of not more than 1.0 percent may be imposed whenever benefit payments would jeopardize reasonable reserves. New employers pay at a rate of 1.25 percent for the first two years of participation. BONDING REQUIREMENTS—Since reimbursing employers pay the unemployment fund after benefits have been paid, federal law expressly authorizes states to establish bond or other reasonable requirements to assure that, in the event the reimbursing employer ceases to exist or otherwise does not pay, the unemployment fund is not left with unreimbursed costs. The following table lists those states which have imposed bond or other deposit requirements. (Note this table does not necessarily reflect state law pertaining to treatment of Indian tribes.)

Table 2-19: STATES THAT REQUIRE BOND OR DEPOSIT OF EMPLOYERS ELECTING REIMBURSING State AL Provision is: Mandatory Optional X Amount Percent of taxable payrolls determined by director or administrator. Not to exceed the maximum percentage charged to contributing employers.

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Table 2-19: STATES THAT REQUIRE BOND OR DEPOSIT OF EMPLOYERS ELECTING REIMBURSING State AK AR CO CT DC GA HI ID IA KS KY ME MD MA MI MS NC NJ NM OH OR PA PR RI SC SD TX UT VA X X X X X X X X X X X 6/ X X X 5/ X X X X X X 4/ X X X Provision is: Mandatory Optional X X X 1/ X 2/ X X 3/ Amount determined by regulation. Prepays estimated charges each quarter. Greater of 3 x amount of regular and ½ extended benefits paid, based on service within part year or sum of such payments during past 3 years, but not to exceed 3.6% nor less than 0.1% of taxable payrolls. Percent of taxable payrolls not to exceed the maximum contribution rate in effect. 0.25% of taxable payroll. 2.7% of total payrolls. 0.2% of total payrolls. Determined on basis of potential benefit cost. 2.7% of taxable payrolls. (Provision currently inoperative) 5.4% of taxable payrolls. 2.0% of total payrolls. By regulation; not to be less than 2.0% nor more than 5.0% of taxable wages. 2.7% of taxable wages if the organization has taxable wages less than 25 x the taxable wage base or 5.4% of taxable wages if the organization’s taxable wages equal or exceed 25 x the taxable wage base Percent of taxable payrolls not to exceed the maximum contribution rate in effect. No amount specified in law. 2.7% of taxable payrolls for nonprofit organizations and 2.0% of taxable payrolls for governmental entities. Non-profits must keep 1% of prior year’s taxable payroll in unemployment fund. Percent of taxable payrolls not to exceed the maximum contribution rate in effect. 2.7% of contributions x the organization’s taxable wages. 3.0% of taxable payrolls but not more than $2,000,000. 2% of total wages for the 4 calendar quarters immediately preceding effective date of election to reimbursable status. 1.0% of taxable payroll for the most recent 4 calendar quarters prior to election of reimbursable status. Determined by rule. No greater than double amount of estimated tax due each month, but not less than $100. Bond from nonprofit organizations which do not possess real property and improvements values in excess of $2 million. Regulation requires bond or deposit of minimum of $2,000 for employers with annual wages of $50,000 or less. For annual wages exceeding $50,000, an additional $1,000 bond required for each $50,000 or portion thereof. Maximum effective tax rate x organization’s taxable payroll. Higher of 5.0% of total anticipated wages for next 12 months or amount determined by the commission. Non-profit employers may be required to deposit 1% of total wages paid in four calendar quarters prior to demand. In the absence of four quarters of wages, the Division will determine the amount. Deposit subject to adjustments. Determined by commission based on taxable wages for preceding year. Amount

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Table 2-19: STATES THAT REQUIRE BOND OR DEPOSIT OF EMPLOYERS ELECTING REIMBURSING State VI WA WI WY X X Provision is: Mandatory Optional X X 1.35% of taxable payrolls. Amount sufficient to cover benefit costs but not more than the amount organization would pay if it were liable for contributions. 4.0% of taxable payrolls of preceding year or anticipated payroll for current year, whichever is greater. No amount specified in law. Amount

1/ Regulation states that bond or deposit shall be required if it is $100 or more. 2/ If agency deems necessary because of financial conditions. 3/ Exempts nonprofit institutions of higher education from any requirement to make a deposit. 4/ Bond or deposit required as condition of election unless agency determines that the employing unit or a guarantor possesses equity in real or personal property equal to at least double the amount of bond or deposit required. 5/ Applies only to nonprofit organizations who pay more than $100,000 in remuneration in a calendar year. 6/ Applies only to nonprofit organizations.

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